Officials at trade group said in a Feb. 2 letter to Federal Trade Commission Chairman Jon Leibowitz that the deal, which would create the biggest U.S. firm for managing employees’ prescription-drug benefits, would “harm supermarket pharmacies by significantly reducing reimbursement rates.”

U.S. Senator Herb Kohl, chairman of the Senate’s antitrust subcommittee, also wrote Leibowitz on Feb. 2, saying the acquisition would “reduce choices” for large employers seeking so-called pharmacy benefit managers.

It’s likely the FTC is examining how a combined Express-Medco would have dominant market shares in mail-order pharmacies and drug stores that sell specialty medicines such as those for HIV patients, said Stuart Gerson, of Epstein Becker Green, who had no direct knowledge of the investigation. The agency also probably is looking at the impact on Fortune 100 employers, he said.

“The heat” of the FTC’s scrutiny “is going to continue” on the deal, Gerson said. Less important from the perspective of antitrust are pharmacy complaints about reimbursement rates, he said.

Stock Drop

Medco, based in Franklin Lakes, N.J., fell the most in almost six months after Reuters reported that “key people” at the FTC are seeking to stop the company’s proposed $29.1 billion acquisition by Express Scripts.

Medco declined 8.1 percent to $58.47 at the close in New York, the biggest single-day drop since Aug. 8. Express Scripts lost 4.6 percent to $49.67 in the biggest decline since Oct. 25.

In its letter, Cathy Polley, a vice president at the Arlington, Virginia-based group, and Erik Lieberman, the regulatory counsel, said officials from seven supermarket chains have talked to the FTC’s staff.

A reduction in reimbursement rates will lead to increased drug prices and less substitution of cheaper generic drugs for brand-name medicines, reducing consumer choice, they said.

Kohl said in his letter urged the FTC to “impose all necessary conditions on this deal to protect competition and consumers, should you decide to allow it to proceed.”

Cecelia Prewett, an FTC spokeswoman, declined to comment on the status of the Express Scripts-Medco investigation, which began after the companies announced the deal in July.

“We remain confident that the merger will close in the first half of this year,” Brian Henry, an Express Scripts spokesman, said yesterday in an interview after the publication of the Reuters story. The company is cooperating with the FTC as it reviews the deal, he said.

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